With DVD sales hitting a plateau and heir apparent Blu-ray failing to make up the difference, it's easy to see where this is going. While Nielsen VideoScan First Alert figures for the week of May 24 show year-over-year Blu-ray sales increasing by almost 120%, they don't make up for DVD's 13% drop. That's because DVDs still outsell Blu-ray discs by a wide margin – 6-to-1 if the latest sales figures are to be believed – and Blu-ray sales aren't expected to pull ahead of DVD for at least another year.

Survey results released by Harris Interactive seem to reinforce Blu-ray's plight. Of the 2401 people who responded to the poll, 11% said they owned an HD DVD player console. This is pretty remarkable given the fact that HD DVD is a defunct standard whose promotion group was dissolved in March 2008. More disturbing for the winning standard is the fact that only 7% of respondents own Blu-ray consoles.

I'll reserve detailed discussion on pricing for another day, but until average prices for standalone Blu-ray drives hit the $100 sweet spot – NPD Group says they sold for an average price of $261 in Q1, down 34% from $393 during the year-ago period – most recession-weary consumers will hold on to what little cash they have. The average selling price per disc, which typically runs $5 or $10 more than for a comparable DVD, is also keeping consumers from jumping in with both feet. Sure, high-def always looks better than standard-def, but the difference doesn't seem to be large enough to prompt consumers to buy in en masse. Not yet, anyway.

As bad things are for Blu-ray in the living room, they're even worse in the computer market. Blu-ray capability remains relatively scarce in desktop and laptop offerings from vendors at a time when increasingly mobile consumers are tossing optical drives altogether. They're finicky, power-eating beasts that add weight and complexity to the average laptop. Exploding demand for netbooks and increasingly capable online content delivery thanks to services like Apple's iTunes and App Store are driving a growing realization that you can be pretty productive – and entertained – without a spinning drive.

Blu-ray will doubtlessly continue to grow in popularity as more of us buy large HD-capable flat screen televisions. In the same vein, it'll continue to make inroads in computing and video gaming markets. But it's a case of too little, too late, as long-term trends point to a slower uptake than DVDs ever had. When we can simply download a good-enough copy of a movie from iTunes and save it to a USB drive or mobile device for viewing pretty much anywhere, why would we even bother with a power-hungry, noisy, expensive and frankly inconvenient disc in the first place?

By the time most consumers have asked themselves this question, the answer will already be in: Optical discs are a fading technology, and investing in them now could be a shorter-term move than you might have initially anticipated.

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Blu-ray was declared the winning format last year when HD DVD threw in the towel. This victory came after major studios left the HD DVD camp and joined up with Blu-ray. But just because a victory was celebrated, that doesn't mean the format is successful. In fact, a recent Harris Interactive poll shows that many purchased an HD DVD player last year and most don't plan on buying a Blu-ray player anytime soon.

This poll's results might be shocking to some outside the tech community, but it clearly shows that consumers are ready to move past physical media and onto the digital downloads. In fact, secondary polls were conducted as well and found that an overwhelming number of people are "not at all likely" to purchase a Blu-ray device within the next year and many will buy fewer DVDs within six months.

This Harris Interactive poll (PDF) found that 11% of Americans own an HD DVD player despite the format being officially dead. Plus another 3% have the HD DVD add-on for the Xbox 360. This is up over 2008's findings of 6% and 1%, respectively. Blu-ray's penetration also rose, albeit not as much, from 4% in 2008 to 7% in 2009. The same goes for the PS3 with 7% of Americans now owning Sony's gaming system.

But you thought HD DVD was dead? Well, it is. That doesn't mean that consumers didn't take advantage of the fire sales shortly after Blu-ray was declared the victor. Clearly consumers either aren't aware of the benefits that Blu-ray provides, or they just aren't interested in another physical media.

Think about it: 20 years ago, VHS was introduced. People rushed out to buy up all their favorite movies on that format. Then DVD was introduced. That format touted superior picture quality and discs loaded with extra features. So then consumers bought up their must-have movies a second time and continued to grow their collections with new releases.

But then another format was introduced: HD DVD. This time around, consumers heard the same marketing pitch: an even better picture and more extra features. Alright, some bought into that while Blu-ray slowly rolled out and crushed the first high-def optical media type. Many consumers sat on the sidelines as these two fought it out while a third player slowly crept onto the market: digital downloads.

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JAN. 8 LAS VEGAS-MOD Systems has signed deals with Warner Bros. and Paramount Digital Entertainment to make their movies available via downloads to SD cards at kiosks in retail stores later this year.

In a related move, longtime indie retailer and Screenplay founder Mark Vrieling has joined MOD Systems as chief content officer.

In his new role, which was finalized last week, Vrieling will be responsible for securing content from the studios and other program suppliers for MOD's prospective download-to-SD-card system, developing the title assortment to be included and helping MOD refine its retail implementation.

Warner and Paramount are the first major studios to join indie suppliers including Anchor Bay Entertainment, First Look Studios and Image Entertainment in making titles available to MOD, which said it now has rights to 4,000 video titles and 4 million music tracks. MOD is scouting pilot retail locations for a launch of the digital video service sometime this year.

Vrieling will continue to oversee Screenplay but is expected to dedicate the majority of his time to MOD.

"I think the two are actually a perfect marriage," Vrieling told VB at the Consumer Electronics Show here.

Once MOD is up and running, Vrieling hopes to integrate it with Screenplay so that Screenplay clients will be able to offer customers a digital rental or purchase option in their stores along with streamed movie previews.

"Because of Screenplay, I already have a lot of the pieces in place to do this for the retailer, in terms of ingesting content, managing the metadata, accounting and auditing," he said. "It's what I've been working toward for a long time."

Vrieling said MOD is in talks with all the major studios but declined to comment on whether any other deals are imminent.

"The thing that is most interesting to the studios is expanded points of distribution," MOD vice chairman and co-founder Anthony Bay said. "If they can use this to get distribution in airports and convenience stores and other places where DVD doesn't have much of a presence, that's all upside for them."

Bay said he expects the download-to-SD-card system to deploy at retail, at least on a test basis, this year. It will be possible to start a test with just two major studios on board, he said.

Bay wouldn't say when he expects to sign other studios, but added, "different studios have different concerns, but nobody thinks it's a bad idea. They all get that this can and should be part of their digital strategy."

"I think people are coming around to seeing SD as the right portable format," he said. "Optical disc is not a good portable format, and other things like USB drives, flash drives, are not secure."

The first retail deployments are likely to follow the "retail-attended model," in which consumers will browse, select and order titles from a touch screen, but the final fulfillment will be from a manned station in the store, before transitioning to a fully automated system, Bay said.

MOD last year raised $35 million in a first round of venture funding led by Toshiba and NCR, which took minority stakes in the startup.

Toshiba is expected to roll out a line of set-top boxes with SD card slots for playing back digital video downloads saved to the memory cards. ATM maker NCR, which has swiftly expanded into the DVD kiosk business, will build the digital kiosks MOD plans to roll out to stores.

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I'm no expert when it comes to technical aspects of a Blu-ray disc, but I do know that Blu-ray disks are read with a blue laser instead of a red laser, which allows the information to be more tightly packed onto the disk, in turn allowing greater disk space. I also know that Blu-ray can run in all HD resolutions including true 1080p, but what does that mean for your average movie watcher? What about your average gamer?

I own a PlayStation 3 and I love it to death. I don't think I've ever had quite as much fun as hurling down the race track in wipEout HD or spending hours creating random machines in LittleBigPlanet. Point is I bought my PlayStation 3 to play games, it is after all called the PlayStation. Which is why it bothers me when I hear people say they want to buy a PlayStation 3 simply because it plays Blu-ray movies. I've owned my PlayStation 3 pretty much since launch, and I just recently got into Blu-ray movies. Meh.. Blu-ray is not the magical picture show that I had imagined. I've been told by countless friends that Blu-ray looks amazing, that I wouldn't want to go back to watching regular DVDs after seeing what Blu-ray had to offer. But after watching several movies, it really isn't that amazing. Sure the picture looks slightly better, but if you're already watching on an HDTV then you aren't going to notice a huge difference. And is this slight difference really worth 30 bucks? That's a lot of money to shell out for a movie. Content has been argued to me many times. The fact that a movie comes packed with mini-games and extra features are bursting out of the seems. What if you aren't into all of that extra stuff? What if the only reason you buy a movie is to **gasp** watch the movie? Then Blu-ray suddenly doesn't have much to offer.

The cost of a disc is really starting to pull Blu-ray down. I understand that it's more expensive to make a Blu-ray disk, but when buying a movie costs more than going out to the theater and getting the full experience with snacks and all, it's hard to justify. I like watching movies just as much as the next guy, but until the price of a Blu-ray movie drops or they find some way to make the picture significantly better, I'll keep using my PlayStation 3 for games.

Over all I do like what Blu-ray has done for the gaming industry. Though I feel we have yet to see anything substantial come out of Blu-ray as far as games are concerned, I know the possibilities are almost endless. Which brings me to another point about the cost of a Blu-ray disk. The price of movies has almost doubled since going onto a Blu-ray disk, why have games stayed the same price? If the gaming industry can adopt Blu-ray without jacking up their costs on consumers, why can't Hollywood? So I guess the real question would be; am I getting cheated when I buy a movie or am I getting a great deal when I buy a game? 'Cause if it's the latter, with all due respect to Sony, the games on a Blu-ray PS3 disk don't look any different than the games on a regular Xbox 360 disk. In time I'm sure this will change, I just hope they don't jack up the price of a game because of it.

My final verdict on Blu-ray, is that it has almost come before its time. I think that eventually it will take over the gaming and movie industry, but not because of the picture quality. Blu-ray will take over these industries because it can hold more information. As far as gaming is concerned it's good because gamers are still getting Blu-ray at no extra cost. But for right now the best way to get Blu-ray movies, if you're interested in them, is by renting them. Blu-ray is simply not worth the money.

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This Christmas though, manufacturers of these new super high-quality DVD players and discs expect big things as prices fall.

Essentially, Blu-Ray is a better quality DVD designed to work on the new generation of high-definition TVs. The quality is said to be five times better than standard discs.

But while many people are buying large flat screens, they're not yet interested in ditching their old DVD players for something much more expensive.

Despite big price falls in recent months, Blu-ray players are still around £200 and the discs themselves are upwards of £15 each.

Manufacturers of the new technology, like Sony, are still holding out hope it will catch on in a big way.

Industry figures claim three times as many Blu-ray players will be sold next year.

David Walstra is Sony UK's home video marketing director.

He said: "There's always an initial phase when you introduce a new format like Blu-ray but now it's coming into the mainstream.

"We've got a good feeling. We know that the retailers are preparing some interesting promotions like bundling players with TVs, so I think there are going to be very attractive offers in the shops this Christmas."

Certain things are working in the format's favour. Earlier this year, its only rival, HD-DVD, bit the dust, leaving Blu-ray a clear market. The Hollywood film studios are also backing Blu-ray as the future format and prices are falling.

What has also helped is that Sony's Playstation 3 already has a Blu-ray player built in, meaning the format has built up a base market. Two million units have already been sold in the UK.

But while gadget reviewers love the quality of Blu-ray DVD, even they admit its high cost makes it a hard one to sell.

Will Findlater, from gadget magazine Stuff, said: "Blu-ray is a confusing format for most people because ultimately, it looks the same as a DVD. It's a disc that you put in a machine and it plays a film for you.

"It just offers a better quality and that's a difficult thing to sell compared to DVD over VHS."

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Despite Adams Media Research projecting back in June that 14.4 million US households would be able to play Blu-Ray movies by the end of the year, a consortium of movie studios and electronics manufacturers estimate that the actual figure is now likely to be closer to 10.5 million.

The consortium, known as the Digital Entertainment Group, specified last week that the user-base of Blu-Ray compatible devices would come mainly through PS3 sales, of which the consortium predicts will have 8 million US users before 2009. Research group Adams Media however estimated in June that over 10 million PS3s would be sold in the US by that time.

The price of Blu-Ray players are taking a considerable drop in America right now in the hope that units for $200 will encourage adoption of the format.

One member of the consortium, Sony Pictures Home Entertainment president David Bishop, said that "the only dark cloud is the economy" before adding that the PS3 sales in America remain on target and "show no slowdown." Currently there are 5.7 million PS3s in US homes, with Sony expecting that figure to climb another 4-5 million before March. "We remain pretty confident that we'll meet our targets for the fiscal year," said a spokesperson for Sony Computer Entertainment America.

The panel also agreed that the format is very young, having just only just won the format battle with the Toshiba and Microsoft-backed HD-DVD format. DVD revenue continues to fall, dropping 6 percent through 2008.

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Executives hoping that the weak consumer embrace of high-definition discs will strengthen during the holiday season thanks to clarity on format and hardware issues suddenly face this rude awakening: It's the economy, stupid.

The format war is over, hardware prices are falling and studio marketing efforts finally are taking hold with retailers. Yet the economic downturn has become a chief reason for fearing that holiday sales of Blu-ray Discs will prove more naughty than nice.

Hollywood is counting on Blu-ray -- winner of a bloody format with now-failed HD DVD -- to become the next-generation format of choice for home entertainment, compensating for a DVD cash cow that's starting to run a bit dry. But consumer concern about the worsening economy couldn't have spiked at a more inopportune time: the cusp of the holiday gift-buying season.

"The economy is the biggest challenge, because there are just so many pieces to the Blu-ray puzzle that consumers face," said Lori MacPherson, GM of domestic home-entertainment at Disney. "You need the high-definition television set, you need the player, you need the cables, you need the software . . ."

MacPherson still believes Disney's seasonal slew of new releases and catalog titles in the Blu-ray format will help stir previously resistant consumers to check out the HD format. But industry colleagues participating in a panel discussion Tuesday at the HD3 conference in Century City agreed that the onset of recession won't help.

"The economy is hitting everybody," said Danny Kaye, executive vp research and tech strategy at Fox. "But we still look forward to a great fourth quarter."

If that sounds a bit like whistling past the HD graveyard, it should be noted that there also are distinctly positive bits of news on the home entertainment horizon.

"I know the economy is tough right now, but the manufacturers are really bringing down the price of their HDTV sets," Paramount vp marketing Chris Saito said.

Blu-ray player prices also are heading south, though perhaps not as quickly a recession-minded consumers might like. Although several manufacturers are flirting with the $200 price point long considered key to platform launches, most Blu-ray players still sell for considerably more.

Then there are the discs. Movie releases on Blu-ray sell for upward of $25, whereas most DVDs retail for $15 or less.

"We're all constantly looking at (disc) pricing," Sony vp business development Rich Marty said. "What it amounts to is that we'll wait until after the fourth quarter and see how it goes."

Blu-ray backers can take heart in the relatively modest negative impact of economic downturns on tech rollouts, said analyst Tom Adams of Adams Media Research in Carmel Valley, Calif.

"It may slow adoption down a little bit if there's a recession brewing," Adams said. "But in the adoption of other successful technologies over the next 50 years, it hasn't been more than a speed bump."

In any event, Blu-ray proponents shouldn't panic over the prospect of a longer slog toward broad consumer embrace than some might have hoped for, Fox's Kaye said. "It never happens overnight," he shrugged.

Contrarians have suggested the spread of HDTV sets might not prompt a corresponding rush to Blu-ray if consumers opt instead to boost DVD image resolution via so-called upconverting technology. But those kind of image manipulations fail to match Blu-ray standards and won't pass muster with the majority of consumers, MacPherson said.

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Blu-ray is in a death spiral. 12 months from now Blu-ray will be a videophile niche, not a mass market product.

With only a 4% share of US movie disc sales and HD download capability arriving, the Blu-ray disc Association (BDA) is still smoking dope. Even $150 Blu-ray players won't save it.

16 months ago I called the HD war for Blu-ray. My bad. Who dreamed they could both lose?

Snatching defeat from the jaws of victory
Delusional Sony exec Rick Clancy needs to put the crack pipe down and really look at the market dynamics.

In a nutshell: consumers drive the market and they don't care about Blu-ray's theoretical advantages. Especially during a world-wide recession.

Remember Betamax? SACD? Minidisk? Laser Disk? DVD-Audio? There are more losers than winners in consumer storage formats.

It's all about volume. 8 months after Toshiba threw in the towel, Blu-ray still doesn't have it.

The Blu-ray Disc Association doesn't get it
$150 Blu-ray disc players are a good start, but it won't take Blu-ray over the finish line. The BDA is stuck in the past with a flawed five-year-old strategy.

The original game plan
Two things killed the original strategy. First the fight with HD DVD stalled the industry for two years. Initial enthusiasm for high definition video on disk was squandered.

Second, the advent of low cost up-sampling DVD players dramatically cut the video quality advantage of Blu-ray DVDs. Suddenly, for $100, your average consumer can put good video on their HDTV using standard DVDs. When Blu-ray got started no one dreamed this would happen.

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What is supposedly the world's last "HD DVD" release is now available exclusively at DVAspecial. The title in question is P2, a 2007 horror film which performed poorly at the box office, the title is available for $26.99.

Interestingly, Brad Kugler the CEO of DVA claims to have inked a deal with an unknown studio for more HD DVD releases. It remains unclear if Mr. Kugler is referring to new titles or those previously released.

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Straight from El Jobso's mouth at today's notebook keynote: "Blu-ray is just a bag of hurt. It's great to watch the movies, but the licensing of the tech is so complex, we're waiting till things settle down and Blu-ray takes off in the marketplace." Phil chimed in with "We have the best HD movie and TV options in iTunes." Damn. As if that weren't enough to make Mac-lovin' home theater junkies cringe, Steve also commented (when asked about the dearth of HDMI in his introductions) that HDMI was "limited in resolution," and Philip Schiller elaborated by saying that "for typical computer use, DisplayPort is the connector of the future."

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An exasperated Aaron Greenberg has flatly denied there are any plans to add Blu-ray to the Xbox platform. Seriously: it's not happening.

"We have no plans to integrate Blu-ray into the Xbox experience," the Microsoft production boss told Major Nelson in Tokyo in response to recent rumours that a contract had ben awarded to create an external Xbox 360 Blu-ray player.

"We believe that we shouldn't force people to pay for things they don't want. We also believe that the future's digital, and that's why we've invested in a massive library of entertainment content, that's why we're bringing things like Netflix to members in the US, that's why we're growing our library in Europe, that's why we're adding all type of entertainment experiences around the world."

The exec went on to ridicule the format, saying that years from now there'll be an expression, "It got Blu-rayed," and that, "It's pretty clear it's not the next DVD".

"And Blu-ray: who knows? I'll tell you one thing: if you look at retail sales and availability, there's not a lot there, and what is there is at a premium," he said.

"No one knows what Blu-ray will be. It's pretty clear it's not the next DVD, right? The days of one physical format being the standard are gone.

"I went to Sony's booth, and it used to be that their whole booth was Blu-ray. It just keeps shrinking down. Now it's just this little corner and there's no one there and it's like, there's a heart sign and it's got 'Blu-ray' and some movies. It's interesting."

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It may have lost the home entertainment war to Sony's Blu-ray technology but tougher economic conditions have breathed new life into Toshiba's HD DVD format.

Sony delivered what appeared to be a knock-out blow to HD DVD in the spring when it secured backing from the biggest Hollywood studios, which then dropped their support of the Toshiba technology.

But aggressive price cuts have maintained the market for HD DVD players, which also play standard DVDs.

The cost of discs has fallen from $40 in some cases to as little as $10, while players can be picked up for less than $60, compared with about $250 for a Blu-ray player. Thousands of HD DVD titles continue to be available, including relatively recent blockbusters, such as American Gangster .

This has maintained demand for the format, which continues to be supported by online retailers, such as Amazon and Buy.com, smaller electronics chains and second-hand stores. "We expected to see a huge increase in Blu-ray sales and HD DVD dying [when Blu-ray won the format war] but it just hasn't happened," said Jeff Wisot, vice-president of marketing with Buy.com, an online retailer.

"HD DVD sales are still very strong," he added.

Ryan Kugler, president of Distribution Video & Audio, the largest buyer of excess video and audio inventory, has bought millions of unsold HD DVDs that were returned to the studios by big retailers.

He has resold more than 1m units to online retailers and discount stores and expects to sell another 2m-3m in the run-up to Christmas.

"Cheap entertainment always does well in a recession or depression," he said.

With Hollywood studios no longer releasing new titles on HD DVD, retailers know that the format has a limited shelf-life.

"There's a much more limited selection of titles [than with Blu-ray] because there wasn't the same level of studio support for HD DVD," said Andy Parsons, chairman of the Blu-ray Disc Association.

Mr Parsons said sales of Blu-ray discs are up 53 per cent on last year.

"We're only two years into the life of this format and it took longer than that for DVDs to take off," he said.

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CNET's Crave on Friday reported on Nielsen's latest VideoScan figures, showing that Blu-ray Disc's market share in the video disc market has slumped in the past week.

According to Nielsen, Blu-ray's market share dropped to just 8 percent of the overall market, giving DVDs a whopping 92 percent ownership.

Granted, those figures show only one week's performance, and Blu-ray may have a huge week soon and capture more of the market, but let's be honest with ourselves: do we really think that will happen?

According to a study released in August by ABI Research, more than half the people it surveyed had no plans to buy a standalone Blu-ray player in the near future, and 23 percent are considering it, but not until 2009.

When your format is limping along with just 8 percent of the market, the last thing you want to hear is that only 23 percent of the population actually wants a Blu-ray player.

But wait! There's always the PlayStation 3, right? Surely, everyone who knows about Blu-ray is picking up a PlayStation 3 to watch their movies. After all, won't that product be the savior for which Sony has been waiting?

Please. According to NPD's latest numbers, Sony sold just 185,000 PlayStation 3 units, which represented a 17 percent drop, compared to July sales numbers. Worse, it barely beat out the PlayStation 2, DVD player and all.

The PlayStation 3 isn't going to be Blu-ray's savior, and neither is that sub-$200 price tag. At this point, I simply don't see how Blu-ray has a chance.

Eight percent of the market is nothing. Sure, it's a young product, and DVD started out slowly too, but do all the people who espouse the belief that Blu-ray will succeed somehow forget that the jump between VHS and DVD was substantial?

Find yourself a VCR, and pop a tape into it. After that, throw a DVD into your player, and watch it on your HDTV. When you're done with that, do me a favor, and pop a Blu-ray movie into your PS3. Notice anything shocking when comparing VHS to DVD and anything, well, disappointing when comparing that DVD movie to Blu-ray?

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One of the driving forces behind Sony's plan for the PS3, Blu-Ray, is showing signs of decline.

The cause could be a variety of factors, from the failing economy to the summer gaming doldrums, but the effect is clear: Blu-Ray as a media format is in decline.

The news has to be worrisome for Sony, whose PlayStation 3 console has the Blu-Ray disc format as a cornerstone of its strategy to get a multi-purpose gaming and media hub into homes the world over.

In response to the sluggish sales, Sony even went to far as to drastically slash its Blu-Ray player prices to the magic $200 mark, a la Microsoft with the Xbox 360, with other models going for as low as $250 as of this writing. Tech blog Engadget called the new price points "unquestionably delectable," but another observer at the Industry Standard said the cuts and a number of other indicators betray the fact that conditions may not be so rosy.

For example, in the latest Wired magazine, Sony and Microsoft went so far as to include a free Blu-Ray disc, the seven part film noir flick Coma, as part of a full page insert.

"I don't know how much this is costing Sony and its partners, but it can't be cheap -- Wired's paid circulation is 706,494, and this press release indicates that other magazines may be involved," wrote Industry Standard writer Ian Lamont.

Sony is betting the price cuts (and the PS3) will bolster Blu-Ray in time for the winter holiday, but Lamont is wary--especially as more and more consumers turn to the Internet and services like iTunes for their HD content.

"Sony better hope that mainstream consumers feel the same way [about the price cuts], or the company risks another weak Christmas for Blu-ray this year -- and losing out in an even bigger way when consumers begin to turn to the Internet for their HD content," he said.

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Samsung has said that it sees the Blu-ray format only lasting a further 5 years before it is replaced by another format or technology.

"I think it [Blu-ray] has 5 years left, I certainly wouldn't give it 10", Andy Griffiths, director of consumer electronics at Samsung UK told Pocket-lint in an interview.

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